From finance to people accelerator: The CFO’s evolving role

The following is a contributed article by Liam Butler, ‎VP, Corporate Sales in EMEA region at human resource management company ‎SumTotal Systems

The recession forced the CFO and finance to step up to the plate. By helping businesses restructure their organisations, manage risk vs. cost, curb unnecessary expenditure, balance the books and ensure healthy cash flow, finance proved its mettle during the toughest times. In the growth economy since, this role has done anything but retracted and now is front and centre of driving strategic business decisions.

Services make up nearly 80 per cent of the output of our economy, according to March 2016 figures. Combine this with an often saturated product and services marketplace, it’s clear that people, their talents and their skills are the lynchpin around which many businesses base their profitability, find innovations and key differentiators, and around which many strategic business decisions are made.

This said, people also make up the majority of many business’ operating costs. Balancing investment in people with a strategic plan that curbs waste and unhidden costs is therefore paramount.

That’s why CFOs are now being positioned, alongside HR, at the intersection of productivity, expenditure, investment, and innovation. In fact, they are considered the performance accelerator in many businesses. The key tenets of the CFO’s proposition when it comes to talent management and acquisition are strong financial modelling and analytical skills. These lend themselves to a holistic organisational perspective made through an assessment of data.

These skills are more important than ever before when making sound, informed decisions on budget priorities and allocation for maximum learning-and-development (L&D) return on investment, especially in a business environment in flux. Workforce trends are driving organisations to redesign themselves, moving from traditional, functional structures to interconnected, flexible teams built around specific projects. These include the gap in digital and highly skilled sectors (70% of organisations cite ‘capability gaps’ as one of their top five challenges according to a SumTotal whitepaper), flatter work hierarchies and importantly, the management of Millennials. Millennials are taking on more responsibility in the workplace and organisations need to address their expectations. This includes providing accelerated development opportunities that over two-thirds of Millennials say an employer will need to have in place in order for them to stay – all the while ensuring that funds directed to them are well placed.

Traditionally, finance has never reported money invested in training and development in financial statements, meaning that it has rarely received the attention it deserves. Yet with the shift in workforce trends, more than two-thirds of CFOs now take an active role in recruitment and talent management, according to the same SumTotal whitepaper. For example, some finance departments are now closely monitoring the acquisition of key hires, their performance after three months and the return on investment that hire has contributed to the business. Simultaneously, finance is working closely with HR to better understand where cost can be saved through reducing employee churn. Often, a case can be made for promoting talent from within to replace strategic, high level jobs when positions become available. As well as saving on external recruitment fees, this can also inspire existing employees to remain with the company and grow in to another position.

Continuing to move along the strategic path, the finance department will take a more active role in balancing, assessing and making the case for L&D investment. With budgets under pressure, understanding exactly how much the company is spending on training per employee – and measuring the impact of this training investment – is an imperative. According to the CIPD, poor quality people management costs UK businesses £84 billion a year in workforce disengagement, performance and productivity.

But, calculating the true cost of talent management isn’t quite as straightforward as simply monitoring L&D spend against budget. And, as finance’s role evolves it will need to take into consideration the hidden expenditure related to training. Whatever the cost of learning expenditure per-head every year, it can at least double - if not quadruple - that number once all associated indirect costs are factored in. These indirect, variable, costs include loss of productivity when employees undertake training and wasted training investments – for example, when employees fail to attend a scheduled training event on the day due to illness or workplace demands.

So, what will finance do? Finance will work closely with training partners and HR to develop appropriate metrics to monitor and measure the efficacy of learning and development programmes – developing specific measurements to quantify returns on each programme; assessing the behavioural change and/or business impact resulting from training interventions; assessing learner feedback and workplace engagement; and using analysis to continuously refine the talent management programme.

Finance will also actively pursue the implementation of the right tools. A centralised, integrated and well-managed talent management solution gives access to the right data that aligns with these metrics, allowing the HR team to better align human capital decision-making with corporate goals.

When it comes to people performance, productivity and innovation, organisations can no longer rely on ‘gut feel’. The CFO and finance department is ideally placed to take strategic responsibility for understanding the ROI for L&D, manage its hidden costs, and ensure budget spent is maximising value for every part of the business. Going beyond merely tracking costs, finance can understand when to further invest or withdraw budget – supported by its superb analytical skills and insight to data – if afforded by the right LMS.

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